US layoffs remained low in the latest week, keeping the employment base relatively firm at a time when workers’ compensation pricing continues to soften and employers are bracing for another sharp increase in health benefit costs.
Initial claims for unemployment benefits fell by 10,000 to 196,000 in the week ended September 12, the lowest level since mid-July. Labor Department figures also put the four-week moving average at 203,250, down 2,750 from the previous week. Continuing claims fell by 39,000 to 1.73 million in the week ended September 5.
The reading was lower than economists expected, although the Labor Day holiday may have distorted the weekly figures.
“The exceptionally depressed number last week might reflect seasonal adjustment issues related to Labor Day, but the underlying picture remains encouraging. For now, then, the Fed will remain laser-focused on inflation,” said Samuel Tombs, chief US economist at Pantheon Macroeconomics.
The claims data add to evidence that employers are still holding on to workers. US employers added 162,000 jobs in August, while the unemployment rate remained unchanged at 4.1%, according to the Bureau of Labor Statistics.
For the workers’ compensation market, sustained employment helps preserve the payroll base against which much of the industry’s premium is calculated. That matters as pricing continues to move in employers’ favor.
The Council of Insurance Agents & Brokers reported that workers’ compensation premiums fell by an average 3.2% in the second quarter of 2026. It was the 18th consecutive quarter in which respondents reported declining workers’ comp pricing.
Those reductions are landing even as the underlying cost of individual claims moves higher.
NCCI said workers’ compensation net written premium slipped 0.2% in 2025, while lost-time claim frequency declined 2%. Medical and indemnity claim severity, however, both rose 4%.
The industry still produced a strong 91% calendar-year combined ratio, marking a 12th consecutive year of underwriting gains, but the accident-year combined ratio reached 102%.
Higher wages are contributing to the severity trend. NCCI said indemnity severity has historically tracked wage growth relatively closely and that above-average wage increases since 2020 have pushed indemnity claim costs higher.
That leaves brokers negotiating in a market where favorable loss frequency and strong carrier results continue to support competition, while medical expenses and wage-related indemnity costs are moving in the other direction.
The same employment resilience is creating a different challenge on the employee benefits side.
Low layoffs mean employers generally have not received significant relief from shrinking benefits-eligible populations heading into 2027 renewals. A relatively stable workforce can support premium contributions and benefits participation, but it also leaves employers carrying health plan costs across a larger and more persistent base of covered employees just as medical inflation accelerates.
Preliminary results from Marsh’s 2026 National Survey of Employer-Sponsored Health Plans suggest total health benefit cost per employee will rise by an average 8.2% in 2027, the largest increase since 2003, even after employers make planned changes to control costs. Without those measures, employers estimated their current plans would cost 11% more.
The projected increase follows an estimated 6.7% rise in 2026, when average health benefit cost is expected to exceed $18,500 per employee.
That combination puts benefits brokers in a more difficult renewal conversation. Rather than relying on falling headcount to reduce the overall benefits bill, employers are looking more closely at plan design, employee contributions, networks and strategies for controlling high-cost claims.
Marsh found that 59% of employers expect to make cost-cutting changes to their health benefits for 2027, including changes that could increase members’ out-of-pocket costs. Separate research found nearly half of large employers expect to make medical plan changes such as higher deductibles or copays, while 31% already offer or plan to offer a non-traditional medical plan in 2027.
Retention will complicate how aggressively employers can shift those costs. A labor market in which layoffs remain subdued gives companies less reason to treat benefits purely as an expense reduction exercise, particularly where employers are still competing for specialized workers.
“Continuing claims are at similar levels to May 2023, a time when the unemployment rate was only 3.6%. The pattern of residual seasonality in continuing claims is different than for initial claims, and continuing claims could edge higher again starting in late September,” said Abiel Reinhart, economist at JPMorgan.
